I try not to concentrate too much on where a stock has been with exception to the 52 week highs and lows. I use these as benchmarks to determine future price points and earnings tracking.

Much of my investment strategy has to do with earnings and funamentals but not always. Momentum stocks can be just as good if you understand the catalyst involved and know when to get in and out. A major part of understanding where a stock can or should be is understanding the sector, the factors that went into getting the stock where it is now and figuring out where it can go based on future outlook.

With most stocks, you can do this by looking at earnings over the next year. I trade on a 6-18 month timeline because figuring out the numbers works best for that time period. You can trade much shorter timelines if you know the factors that make up the momentum.

Take a look at Marvel Entertainment (MVL). I traded this one earlier in the year because despite all the other people saying the numbers were baked in for Iron Man, nobody had expected the movie to do as well as it had. Except me, of course. I figured it was going to be a big earner compared to The Hulk, but even that movie has done well. Tie that in with all the new comics and other franchise opportunities the success of Iron Man has created and you could see where it was going to go. Read my previous articles to learn my trading strategy earlier in the year.

Marvel is nearly back to the same levels it was at in May but the 52 week low is still $21 and change. Volume is currently only around 1 million shares over a 10 day average, so the steady decline in price makes sense. When a stock like this doesn’t trade a lot of shares the price can be manipulated much easier. A wall of selling and short orders will drive the price down fast.

Since earnings look flat over the next year, you can’t use them to predict price. Revenue on the other hand looks to increase nearly $100 million over the next year. With projects like Thor, Iron Man 2 and Captain America in the works, Marvel is going to be a force to contend with at the box office for the next few years.

I don’t think Marvel is doing going down for now and the next earnings call is August 4, 2008 so I would wait to do anything until afterward. I expect the news will be good because of the summer box office, but nothing else is happening for the company until next summer which is why the stock has had the steady decline over the past few months.

I’ll keep an eye on this one and let you know what I think after the call in August.